UK and International Tax news

Gaines Cooper Supreme Court Decision

Tuesday 15th November 2011

Further to our UK Tax News article of February 2010, in which we reported that the taxpayer had lost his appeal for judicial review of how HMRC interpreted their IR20 guidance to determine his residence in the UK for tax purposes in the Court of Appeal, the Supreme Court has recently issued its decision on the appeal heard in July 2011. The Supreme Court upheld the Court of Appeal decision by a 4 to 1 majority, with Lord Mance dissenting.

Lord Wilson gave the main part of the decision, which included an analysis of the development of IR20 and, in particular, stated that “At last comes the moment in which to stand back from the detailed textual analysis of the booklet and to survey the wood instead of the trees. Unlike – so it seems – its successor, namely HMRC6, the exposition in the booklet of how to achieve non-resident status should have been much clearer. My view however, is that, when all the passages in it to which I have referred were considered together, it informed the ordinarily sophisticated taxpayer of matters which indeed were unlikely to come as a surprise to him, namely that:

(a) he was required to “leave” the UK in a more profound sense than that of travel, namely permanently or indefinitely or for fulltime employment;

(b) he was required to do more than to take up residence abroad;

(c) he was required to relinquish his “usual residence” in the UK;

(d) any subsequent returns on his part to the UK were required to be no more than “visits”; and

(e) any “property” retained by him in the UK for his use was required to be used for the purpose only of visits rather than as a place of residence.

He will surely have concluded that these general requirements in principle demanded – and might well in practice generate – a multifactorial evaluation of his circumstances on the part of the Revenue albeit subject to appeal. If invited to summarise what the booklet required, he might reasonably have done so in three words: a distinct break”.

Lord Wilson concluded “In my view the Court of Appeal was right to hold that the appellants failed to establish that, by its inquiries and determinations in respect of them, the Revenue was departing from a settled practice such as to found a legitimate expectation. In about 2001, probably triggered by the mobile workers, scrutiny of claims to non-residence became more frequent. But when, previously, claims had been scrutinised, had the Revenue adopted a settled practice of applying criteria different from those identified not only by the ordinary law but also in its own booklet read as a whole? The appellants’ evidence to this effect was far too thin and equivocal”, and dismissed the appeals.

Mr Gaines-Cooper issued a statement on his website following the decision in which he confirmed he would seek the views of his legal advisers with a view to referring the case to the European Court.

If you would like to discuss the above in more detail, please contact Keith Rushen on 0044 (0)20 7486 2378.